Tag Archives: Euro

Spaniards and Italians Will Never Accept Greece’s Fate

The markets have been transfixed by the ECB’s plan for unlimited purchases of bonds - or outright monetary transactions, as they are to be called. But the ECB’s implicit deal with Germany, to link any bond purchases to the European rescue funds’ strict fiscal conditions, has tied its hands. Saving the euro now depends on proud nations like Spain and Italy being willing to kowtow to their new masters in Berlin. Judging by the mood of the Spanish people, it’s more likely that Spain will call Germany’s bluff and threaten to leave the euro forthwith, unless it is given unconditional support.
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Eyes Wide Shut as Spain’s Banking System Collapses

As Spain collapses into depression, its banks are holed below the waterline and sinking rapidly, because they are the only remaining buyers of Spain’s sovereign debt. The government, unable to provide state aid to its banks, is desperately bending over backwards to hide the true state of its financial sector.
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Germany’s Approaching Götterdämmerung

Germany has been viewed as a safe haven by investors, until now. After all, its export sector has been booming. But investors are beginning to bet against Germany and its manufacturing firms, as a break-up of the euro-zone creeps ever closer. This is because the cost of failure for Germany is growing fast, and the Bundesbank may be trying to force the government’s hand before it digs itself a deeper hole.
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Has Standard & Poor’s Got Its US Numbers Wrong?

The S&P might just have catastrophically damaged its credibility. The US Treasury has just issued this rebuttal of S&P's downgrade of US debt. As if the ratings agencies did not have enough trouble in Europe, they have now given the US government justifiable cause to shake up the present ratings system. This basic error in its calculations appears irresponsibly casual and unprofessional, at the worst possible time. The scapegoating of the ratings agencies in Europe may be ludicrous, but it's a fair bet that EU politicians are going to make capital out of this. If S&P's downgrade was motivated by a desire to make up for its shortcomings during the credit bubble, it has seriously miscalculated.
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Eurozone Governments May Need To Bail Out Municipalities

A lot has already been written about the risk to municipal bond holders in the U.S., as a growing number of states face severe fiscal problems. But local government debt is an even bigger threat in Europe - where it could force governments to assume the debt, putting further pressure on sovereign bond spreads.
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Update: Call for A Eurozone Break-up

A rare column arguing that the peripheral countries of the monetary bloc should simply leave the eurozone by decree, has been published in the Institutional Investor. Vincent J. Truglia, Managing Director of Global Economic Research at Granite Springs Asset Management, writes that the flawed structure of the eurozone - which was built for political rather than economic reasons - leaves only two questions: 1) How do you handle the shrinking or dismantling of the Eurozone? and 2) What is the timing of such changes? As the tensions tearing the euro apart will only grow, it's likely that we'll see a lot more articles like this one in the future.
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The Second Wave of Europe’s Banking Crisis is Crystallizing

As the crisis in the European financial sector deepens, trading patterns are indicating a major sell-off within the next month, if the market breaks out of the flag patterns forming in the MSCI European Financials Index. After all, the ECB’s extension of its liquidity safety net for vulnerable euro zone banks – and the guarantees for troubled banks in Ireland – can only fuel suspicion about skeletons in the closet.
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What A Wicked Game to Play: The Truth Germany Conspires to Hide

Germany’s politicians are up to their necks in fraudulently covering up the true state of their banking system. Getting serious about cleaning up their banks would mean admitting the financial crisis was not all the fault of Anglo Saxon bankers. The price that Germany and Europe as a whole pays for this disingenuousness is likely to be another full-blown banking crisis. Only this time it will be Chancellor Angela Merkel and her colleagues that end up being cast as the villains.
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Running Faster to Stand Still, Ireland is Going Nowhere Fast

Standard & Poor’s cut to Ireland’s credit rating is hardly a surprise given that Irish debt is estimated to peak at 137% of GDP, against government estimates of about 94%, despite austerity that will have seen the economy contract by around 15% since 2008 by the end of 2010.  Many more downgrades can be expected [...]
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Unduly Rosy Indicators Disguise Real Slowdown Headed Germany’s way

Investors, and Germany’s central bank, need to be wary about jumping to the conclusion that the strong growth in the second quarter will continue.  The fiscal austerity being implemented in Greece and the other Club Med countries is not yet reflected in the expectations that leading indicators measure, and contrary to media reports, exports to [...]
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